The COVID-19 pandemic has upended the global economy, resulting in large losses of gross domestic product worldwide. In this report, the author reviews the economic track record of the United States and its main competitors and allies to discern how the dramatic economic changes induced by the pandemic could affect geopolitical competition and the future security environment.
Disruption Without Change
The Consequences of COVID-19 on the Global Economic Balance
Published Mar 21, 2022
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- How has the COVID-19 pandemic affected the global economic balance?
The coronavirus disease 2019 (COVID-19) pandemic upended the global economy, resulting in large losses of gross domestic product worldwide. But by the time the pandemic was well into its second year, an unexpected pattern had emerged. The world's worst pandemic in a century accelerated previous trends but had not changed much about the international economic order. China was the only major economy to show positive economic growth in 2020 relative to 2019 but reversed necessary domestic reforms to do so. The United States was the best-performing advanced Western economy in 2020 but greatly increased its federal debt. Europe and U.S. treaty allies performed less well. Prepandemic trends persisted: China's share of the global economy was growing, that of the United States was holding steady, and that of U.S. allies was declining.
In this report, the author reviews the economic track record of the United States; major U.S. competitors China and Russia; and U.S. allies and partners, including the European Union, the United Kingdom, Japan, Australia, and India, to discern how the dramatic economic changes induced by the pandemic could affect geopolitical competition and the future security environment.
The author also discusses vaccine diplomacy, the effort to distribute vaccines to developing countries, which is exemplary of how the pandemic has affected global competition. The report draws on official data releases, reports by international organizations, and media reports and uses data released through August 31, 2021. It was completed before the February 2022 invasion of Ukraine and has not been subsequently revised.
- Economic performance extended existing trends and exacerbated existing problems such that the geoeconomic balance had not changed as of late summer 2021.
- The United States performed better than other major advanced economies, helped by several major stimulus bills. Continued plans for additional high spending levels have raised concerns about inflation and debt. The pandemic exacerbated inequality as well.
- China was the only major economy to experience positive economic growth in 2020. However, this came at the cost of a reversal of China's economic reform attempts, with debt relative to gross domestic product (GDP) rising. Russia's economy declined less than expected. With oil prices rising in 2021, Russia's recovery appears to be on track.
- Among U.S. allies and partners, the European Union performed poorly in 2020 and then had a further GDP decline in the first quarter of 2021. The United Kingdom was the worst-performing major advanced economy. As in most other countries, Japan's GDP fell in 2020, and partly because of a COVID-19 resurgence, it fell in the first quarter of 2021. Australia performed relatively better than most advanced economies. India had a steep decline in 2020, and although it was thought to have COVID-19 under control in late 2020, the disease surged in the spring of 2021.
- Leaving populations of lower-income countries unvaccinated presents a variety of risks. New variants could develop and the countries will continue to suffer economically, slowing the global recovery.
- COVID-19 opened a new field of global competition: vaccine diplomacy.